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Rockwood Press Release
Rockwood Reports First Quarter Results:
- Net sales of $660.0 million.
- Adjusted EBITDA from continuing operations of $109.2 million.
- As reported EPS from continuing operations of $(0.05) vs. $0.37.
- As adjusted EPS from continuing operations of $(0.02) vs. $0.59.
- Free cash flow of $18.9 million.
Princeton, NJ USA (April 28, 2009) – Rockwood Holdings, Inc. (NYSE: ROC), a global producer of specialty chemicals and advanced materials, today announced results for the first quarter of 2009, as compared to the same period last year.
The highlights from continuing operations for the first quarter are as follows:
- Net sales were $660.0 million for the first quarter of 2009, down 21.8% compared to $843.8 million for the same period in the prior year.
- Adjusted EBITDA from continuing operations was $109.2 million for the first quarter of 2009, down 35.5% compared to $169.2 million for the same period in the prior year.
- On a constant-currency basis, net sales were down 13.3% and Adjusted EBITDA from continuing operations was down 29.1% for the first quarter of 2009.
- Net loss from continuing operations attributable to Rockwood Holdings, Inc. for the first quarter of 2009 was $(3.8) million, including after-tax net non-recurring and other special charges of $2.0 million. Net income from continuing operations attributable to Rockwood Holdings, Inc. for the first quarter of 2008 was $28.7 million, including after-tax net non-recurring and other special charges of $16.7 million primarily related to mark-to-market valuation losses on the Company’s interest rate hedging instruments.
- Diluted loss per share from continuing operations for the first quarter of 2009 was $(0.05), including after-tax net non-recurring and other special charges of $0.03. Excluding net non-recurring and other special charges, diluted loss per share from continuing operations was $(0.02) in the first quarter of 2009. Diluted earnings per share from continuing operations for the first quarter of 2008 were $0.37, including after-tax net non-recurring and other special charges of $0.22. Excluding net non-recurring and other special charges, diluted earnings per share from continuing operations were $0.59 in the first quarter of 2008.
Commenting on the quarter, Seifi Ghasemi, Chairman and Chief Executive Officer, said, “Due to the significant drop in demand resulting from the global downturn, we experienced a large decline in sales compared to last year’s first quarter. The reduction in sales was particularly severe in automotive and construction related businesses. To cope with this downturn, we remain focused on items we can control, such as reducing all costs, improving productivity, and conserving cash by controlling working capital and capital spending. Our business units are working on reduced schedules, shutting down facilities and cutting discretionary spending. We continued to implement our previously announced nine percent reduction in headcount and recorded a restructuring charge related to this program. We expect further benefits from these cost reductions in the second quarter. As a result of implementing these steps, we were able to achieve an Adjusted EBITDA margin of 16.5% during the quarter and generate $18.9 million in free cash flow. We also put some of our cash to work, buying back some bonds at a discount and voluntarily prepaying the normal amortization of our senior debt. In total, we reduced our debt by about $150 million.”
First quarter results, as compared with the same period a year ago, are summarized below:
Specialty Chemicals
Net sales and Adjusted EBITDA decreased 27.7% and 37.5%, respectively.
- In our Fine Chemicals business, lower volumes in most products, particularly in lithium and metal sulfide applications, were partially offset by higher selling prices of lithium products.
- In our Surface Treatment business, lower volumes, particularly in general industrial and automotive applications, were partially offset by increased selling prices, the impact from a bolt-on acquisition and cost control measures.
- Higher raw material costs, particularly in the Surface Treatment business, had a negative impact on results.
Performance Additives
Net sales and Adjusted EBITDA decreased 26.5% and 38.9%, respectively.
- Results were negatively impacted primarily by lower volumes of construction-related products in our Color Pigments and Services and Timber Treatment Chemicals businesses and decreased demand in our Clay-based Additives business.
- Higher raw material costs in our Color Pigments and Services and Timber Treatment Chemicals businesses also had a negative impact on Adjusted EBITDA, partially offset by increased selling prices, cost control measures and the impact of a bolt-on acquisition.
Titanium Dioxide Pigments
Net sales increased 19.9%, while Adjusted EBITDA declined 3.2%. However, net sales and Adjusted EBITDA declined significantly excluding the impact of the venture that was completed in September 2008.
- Lower volumes for titanium dioxide, primarily commodity grade, and functional additives, as well as higher energy and raw material costs, had a negative effect on results.
- Adjusted EBITDA in the first quarter of 2009 was positively impacted by cost control measures as well as the termination of a long-term incentive plan and receipt of a vendor rebate related to prior years.
Advanced Ceramics
Net sales and Adjusted EBITDA decreased 34.0% and 53.8%, respectively.
- Lower volumes in most applications were partially offset by increased volumes of medical products and the impact from a bolt-on acquisition.
Specialty Compounds
Net sales and Adjusted EBITDA decreased 25.9% and 10.3%, respectively.
- Results were down primarily from lower volumes in most applications, particularly in wire and cable.
- Lower raw material costs had a positive impact on Adjusted EBITDA.
Corporate and Other
Corporate costs were down due to lower compensation-related costs and lower professional fees, as well as other cost control measures. Also, corporate costs were favorably impacted by the reversal of certain long-term incentive compensation accruals related to performance targets that are no longer expected to be achieved.
Other Items
Restructuring and other severance costs of $7.8 million were recorded in the first quarter of 2009 primarily related to miscellaneous headcount reductions throughout the Company.
Interest expense decreased $24.0 million in the first quarter of 2009 compared to the same period in the prior year. The first quarter of 2009 and 2008 included non-cash losses of $9.6 million and $30.8 million, respectively, representing the movement in the mark-to-market valuation of our interest rate hedges. Excluding the impact of these losses, interest expense decreased $2.8 million primarily due to lower interest rates and debt repayments, partially offset by debt incurred during 2008 related to the Titanium Dioxide Pigments venture with Kemira.
Gain on early extinguishment of debt. In the first quarter of 2009, we repurchased $15.5 million of our senior subordinated notes due in 2014 and prepaid $102.3 million of our senior secured term loans, for which we recorded net gains of $2.2 million.
Foreign exchange loss of $5.6 million for the first quarter of 2009 was primarily due to the impact of the weaker euro as of March 31, 2009 versus December 31, 2008, in connection with non-operating euro-denominated transactions. Foreign exchange gains of $15.1 million were reported in the first quarter of 2008 due to the impact of the stronger euro as of March 31, 2008 versus December 31, 2007 related to non-operating euro-denominated transactions.
Income taxes. The effective tax rate for the first quarter of 2009 was favorably impacted by a $10.1 million non-recurring tax benefit related to foreign currency changes as well as $8.2 million in domestic tax benefits allocated from other comprehensive income.
Free cash flow was an inflow of $18.9 million for the first quarter of 2009. This amount consisted of net cash provided by operating activities from continuing operations of $49.8 million plus non-recurring items and other, net of $13.2 million and proceeds on the sale of property, plant and equipment of $0.2 million, less capital expenditures of $44.3 million.
Net debt, which is total debt less cash and cash equivalents, was $2,258.9 million as of March 31, 2009 compared to $2,342.5 million as of December 31, 2008. The decrease in net debt was primarily due to the impact of currency changes and the free cash flow generated in the first quarter.
Conference Call and Webcast
We will host a conference call and webcast to discuss the results of operations for the first quarter ended March 31, 2009, on Wednesday, April 29, 2009 at 11:00 am Eastern Daylight Time. The dial-in number to access the conference call in the U.S. is (888) 428-4480 and the international dial-in number is (612) 288-0337. No access code is needed for either call. A replay of the conference call will be available through May 13, 2009 at (800) 475-6701 in the U.S., access code: 994682, and internationally at (320) 365-3844, access code: 994682.
A listen only, live webcast of the conference call will be available at www.rocksp.com. Materials for the call, including a PowerPoint file detailing the results, will be available for download on the site on the morning of the call. The webcast and PowerPoint file will be archived on Rockwood’s website.
Non-GAAP Financial Measures
This press release includes “non-GAAP financial measures,” such as, a discussion of Adjusted EBITDA, free cash flow and net income (loss)/diluted earnings (loss) per share from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items. Adjusted EBITDA is not intended to be an alternative to net income (loss) attributable to Rockwood Holdings, Inc. as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. All presentations of consolidated Adjusted EBITDA are calculated using the definition set forth in the senior secured credit agreement as a basis and reflects management’s interpretations thereof. Adjusted EBITDA, which is referred to under the senior secured credit agreement as “Consolidated EBITDA,” is defined in the senior secured credit agreement as consolidated earnings (which, as defined in the senior secured credit agreement, equals income (loss) before the deduction of income taxes of Rockwood Specialties Group, Inc. and the Restricted Subsidiaries (as such term is defined in the senior secured credit agreement), excluding extraordinary items) plus certain items including interest expense, depreciation expense, amortization expense, extraordinary losses and non-recurring charges, losses on asset sales, less certain items including extraordinary gains and non-recurring gains, non-cash gains and gains on asset sales. We use Adjusted EBITDA on a consolidated basis to assess our operating performance, to calculate performance-based cash bonuses and determine whether certain performance-based options vest (as both such bonuses and options are tied to Adjusted EBITDA), and as a liquidity measure. In addition, we use Adjusted EBITDA to determine compliance with our debt covenants. We also use Adjusted EBITDA on a segment basis as the primary measure used by our chief operating decision maker to evaluate the ongoing performance of our business segments and reporting units. A reconciliation of net (loss) income attributable to Rockwood Holdings, Inc. to Adjusted EBITDA is contained in the press release. We strongly urge you to review the reconciliation. In addition, we discuss sales growth in terms of nominal (actual) and net change (nominal less constant currency impacts). Free cash flow is not intended to be an alternative to cash flows from operating activities as a measure of liquidity. Our presentation of free cash flow is defined as net cash from operating activities from continuing operations, plus non-recurring items and other, net and proceeds on the sale of property, plant and equipment (excludes sales of property, plant and equipment related to sales of businesses) less capital expenditures. Management believes that free cash flow is meaningful to investors because it provides an additional measure of liquidity. Neither net income (loss) from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items nor diluted earnings (loss) per share from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items is intended to be an alternative for net income (loss) or diluted earnings (loss) per share. Management believes that net income (loss) and diluted earnings (loss) per share from continuing operations attributable to Rockwood Holdings, Inc. excluding certain items is meaningful to investors because it provides a view of the Company with respect to ongoing operating results. Reconciliations of these non-GAAP financial measures are included herein. These non-GAAP measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies.
Rockwood Holdings, Inc. is a leading global specialty chemicals and advanced materials company. Rockwood has a worldwide employee base of approximately 10,000 people and annual net sales of approximately $3.4 billion. Rockwood focuses on global niche segments of the specialty chemicals, pigments and additives and advanced materials markets. For more information on Rockwood, please visit www.rocksp.com.
The information set forth in this press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the business, operations and financial condition of Rockwood Holdings, Inc. and its subsidiaries and affiliates ("Rockwood"). Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "predicts" and variations of such words or expressions are intended to identify forward-looking statements. Although Rockwood believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that its expectations will be realized. "Forward-looking statements" consist of all non-historical information, including any statements referring to the prospects and future performance of Rockwood. Actual results could differ materially from those projected in Rockwood's forward-looking statements due to numerous known and unknown risks and uncertainties, including, among other things, the "Risk Factors" described in Rockwood's 2008 Form 10-K on file with the Securities and Exchange Commission. Rockwood does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
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